New Executive : Protocol Pins Hopes on Changes
Protocol Computer Corp., a loss-plagued Woodland Hills data communications company, is pinning its hopes for a turnaround on a new chief executive and a new product. Both appear to be pivotal to the company’s future.
The new president is 38-year-old Paul Singh, an urbane data communications specialist with dual British and Canadian citizenship. He took the reins last week, and has won praise from analysts as a capable executive likely to take the company in the right direction.
The new product, which is supposed to make computer networking easier, is to be unveiled in coming weeks, and analysts say it is just as important to the company’s fate.
Indeed, battered by competition in its bread-and-butter business--devices that let non-IBM computer terminals communicate with IBM mainframe computers--Protocol is at a crossroads.
Losses in Last 3 Quarters
The company did well for a while, earning nearly $900,000 on sales of $15.8 million in the 12 months ended Sept. 30, 1984, and $1.5 million on sales of $11.2 million the year before. But the company lost money, a total of $1.6 million, in its last three quarters, and is expected to post a loss for the quarter just ended as well.
What’s more, Protocol’s main business is suffering. Micom Systems, a Simi Valley company that used to employ Singh, “really cleaned Protocol’s clock” with a better, cheaper converter to let IBM and non-IBM computers communicate, and used its extensive distribution system to sell it, said Michael Murphy, editor of the California Stock Technology Letter.
Now, Murphy added, IBM has unveiled a similar product that is also “aggressively priced.”
Protocol’s market share during the past 18 months has slipped from roughly 25% to about 20% Singh said, adding that the $70-million-a-year converter business is “a relatively small market.”
‘Growth Is Limited’
“Your growth is limited,” he said.
Protocol also has suffered from the ongoing slump in the computer business that has hurt many other companies in the San Fernando Valley area, and has adopted some of the same remedies. In mid-September, before Singh became president but partly because of his influence, the company pared its work force to 65, laying off 30 workers as part of an austerity drive to cut costs by $1 million.
In fact, Protocol’s board includes some familiar names from nearby high-tech companies, including Walter Bauer, former chairman and chief executive of Informatics General, based in Woodland Hills until its takeover by Dallas-based Sterling Software; and Graham Tyson, chairman and chief executive of Dataproducts, also of Woodland Hills.
Finally, Singh said, Protocol has suffered from the failure of its own past management to take the company beyond the converters that make up the bulk of its business, or to develop new computer communications technologies.
Singh hopes to do just that, using his strong background in the business. In 1978 he founded a data communications company in Montreal called Memotec Systems, and sold it two years later when sales reached $1 million a year. Soon after, he joined Micom, where he worked for about four years.
He said that, since January, Protocol has been spending nearly a quarter of its revenue on its new product line, which will allow various computer users to plug into existing networks for a fee, instead of setting up their own networks.
The product is a package of computer hardware and software that lets various users plug into networks cheaply by making the most efficient possible use of the lines that connect them, usually telephone lines.
“Our product will meet the needs of the next generation of networks,” he said.
Worldwide Data Transfer
Using telephone or other communications lines, networks permit the rapid transfer of computer data worldwide, enabling computer users to communicate with each other, and also share data bases and peripheral equipment.
Networks are already commonly used by businesses that have set up their own. But Protocol’s new system is supposed to make it possible for users to hook into a network they don’t own, just as they now connect their phones to lines they don’t own.
Computer networking in the United States “was a private function,” Singh said. “There were very few public networks to which they could hook up.”
Singh was hired by Protocol in January as vice president for marketing and development with an understanding that he’d likely become president. He replaces Richard L. Swarz, an attorney who was president and chairman and retains the latter title.
Firm Not Near Collapse
Swarz, who could not be reached for comment, still owns slightly more than more than half the company’s stock, Singh said.
The company is not near collapse, Singh noted. It has about $4 million in cash from its earlier, profitable days, and its austerity program should make the company at least marginally profitable, he said.
Karen Mulvaney, a technology analyst with L. F. Rothschild, Unterberg, Towbin in San Francisco. called Singh “a very talented individual.”
She said since joining the firm, “he’s been responsible for redirecting the company’s efforts” toward sales in the computer network market.
That is a much larger business than the one Protocol has stressed until now. Singh said the market for Protocol’s new networking devices is $500 million a year and growing.
Moving in Right Direction
Analysts say Protocol is moving in the right direction.
“It is coming to be the generally accepted way to move data,” Murphy said. “On the other hand, there are other companies” making similar network-switching devices.
Murphy said Protocol’s new equipment will have to be better or cheaper or both to succeed, and that Protocol can’t afford to fail.
“They’re not going to get another chance,” he said.
